Under Indian tax regime, disputed taxes amounting to hundreds of crores is collected by the state, goods worth crores of rupees is confiscated by the state, penalties worth hundred of crores are imposed on citizens by the state through the process of departmental adjudication. I was thinking whether there is any procedure, which the adjudicator is required to follow before he can demand a tax of crores of rupess or deprive people of their property by confiscating goods or imposing penalty on citizens. Admittedly, procedure prescribed in Code of Civil Procedure is not applicable- does it mean absence of any procedure? Does it mean procedure based on whims and fancy of the adjudicator? Is there any yardstick against which fairness of the procedure can be judged? Is there any effective remedy against procedural bias? I felt bad groping for answers for these basic questions. This paper is an attempt to find a meaning in these questions, both answered and unanswered.

On one occasion I examined the justice doing function of quasi- judicial authorities of the department and felt that they are not serving the ends of justice. In this paper, the author argues that such lack of procedure in administrative adjudication, or existence of procedure on whims and fancy of adjudicator in adjudication proceeding is the prime reason for such violation of justice.

TAXATION AND JUSTICE

The state exists for justice. Preamble to the Constitution of India clearly says that the state has been constituted by the people of India to secure Justice- social economic and political. If the state is not striving for justice, it looses the very reason of its existence. Thus there must be continuous progess towards achievement of justice. St. Augustine said that a state without justice is nothing more than a robbery- quote,

“Justice being taken away, then what are kingdoms but great robberies,

For what are robberies themselves, but little kingdoms.”

Taxation without justice is nothing but robberies. If tax is extracted without law, or under unjust laws, it is unjust. If tax is assessed through a biased procedure, or goods are confiscated without a fair procedure or penalty is imposed without any procedure, it is a violation of justice. It is collection of tax without justice, it is robbery.

IMPORTANCE OF PROCEDURE:

History of liberty has largely been the history of the observance of procedural safeguards. Justice Jackson stated, “procedural fairness and regularity are the indispensable essence of liberty.” He added that it would be preferable to live under Russian Law under common law procedures than under the common law enforced by Russian procedure.

Procedure is essence of justice. Judicial decisions are made not out of the personal knowledge of judges or advocates. In fact personal knowledge should be avoided in making judicial decisions. Personal knowledge in judges is treated as bias which vitiates the proceeding. Judicial decisions are made, not out of personal knowledge of the judges but out of evidence available on record. Thus it becomes extremely important that only relevant/admissible evidence should be taken on record. Thus it becomes important so that the parties know, what are the evidences, so that they can rebut it. Thus it becomes important to know how oral testimony will be taken on record. If these procedures are violated, it is violation of justice itself. Such procedural safeguards are required to protect the justice.

How an assessee is required to defend himself in tax adjudication, if the procedure of adjudication is not known as the present situation is? How will he defend himself if the adjudicatory procedure is based on whims and fancy of the adjudicator? How an assessee will counter that whims and fancy of adjudication procedure, if it was not told to the defendant during adjudication and those whims and fancy come to the knowledge of the defendant only after adjudication order was served on him? And adjudication without certainty and consistency of procedure puts the defendant in a situation where he cannot defend himself. Such whimsical procedures do not afford adequate opportunity to the defendant to defend himself.

NATURAL JUSTICE AS PROCEDURE:

Although natural justice is fair procedure, that fair procedure is not known to anybody. It cannot be put in a straight jacket formula. Once it cannot be put into straight jacket formula, it cannot be told to the defendant in advance that this will be the procedure followed by the adjudicator. Thus the defendant will be defending himself without knowing the procedure of adjudication. Whether the natural justice has been followed or not in the adjudication will be known only after issue is discussed in appellate proceeding.

Say for example, in tax adjudication, departmental notice is relying on a person’s statement A. Defendant asked for his cross examination. As he wanted to cross examine A, he could not tell everything in written reply on A’s statement as disclosing everything in written reply before cross examination will defeat the very purpose of cross-examination. The adjudicator is silent as to whether he is allowing cross-examination or not. One fine morning, defendant received adjudication order giving reasons of adjudicator for not allowing cross examination and confirming the demand against the defendant because he didn’t counter the statement of A in his written reply. Such adjudication without pre known procedure is not justice, it is mockery of justice. The appellate authorities will discuss whether such denial of cross examination is violation of natural justice or not. If he is lucky, the order will be set aside for violation of natural justice; if not lucky, the order will be upheld on the ground that no prejudice has been caused to him.

President Kalam said justice has become a game of dice. A judicial system, without pre known procedure is worse that game of dice, it is a mockery of justice- a tamasha.

Unfortunately, the state is continuously expanding the scope of administrative adjudication, affecting life, liberty and property of the citizens without any procedural safeguards, in fact without any procedure at all.

Let me take a real example. Penalty was proposed on a assessee under Rule 25 of Central Excise Rules, without giving the exact subclause. The noticee replied to the adjudicator that no sub clause has been mentioned and hence no penalty can be imposed, based on various judgments. Through the adjudication order he learnt that penalty has been imposed under Section 25(b) of Central Excise Rules. As there was no mention in clause (b) in the notice, he didn’t submit anything on clause (b). Is it passing order after hearing? It is mockery of hearing. Now, the system without affording him an opportunity to be heard on the point before original authority, will give him opportunity to be heard on the point of natural justice before appellate authority.

PARTICIPATIVE PROCEDURE:

Prof. John Rawls argued in Theory of Justice that perfect procedural justice should have two characteristics:

(a)    An independent criterion as to what constitute a just or fair outcome of the procedure.

(b)   A procedure that guarantees that fair outcome will be achieved.

What is a fair outcome of a judicial procedure? If the sole criterion is personal view or inclination of the adjudicator, it is not a judicial procedure a at all. On that criterion same outcome can be achieved without any adjudication. In that situation no adjudication is better than administrative adjudication. Let the adjudicator decide things based on his personal opinion, whims and fancies. Professor Rawls himself argued that on that criterion, probably a benevolent dictatorship is better than democratic state. We cannot leave justice at the personal opinion of the adjudicator, howsoever wise he is. We need a procedure that guarantees that fair outcome will be achieved. Unfortunately, todays administrative adjudication has not only left the outcome of the judicial process on the whims of the adjudicator, it has also left the procedure itself at adjudicator’s whims.

Among the various model suggested by Prof. Rawls, Indian system of natural justice is largely based on participation model. The participation model will require that defendant will be afforded an opportunity to be present and heard on all points and evidence affecting the judicial decision making process.

MAKING ADJUDICATOR ACCOUNTABLE:

A very thorough and eye opening paper was written by an advocate which was published in Excise Law Times. The paper has brought forward various instances of abuse of power by departmental officers in general and Adjudicating officers in particular. I am sure no action will be taken. It is not that senior officers of the department are not aware of the wrong doing by various officer, they are not ready to take any action. In fact the senior officers may be doing the same thing a couple of years back, when they were no so senior. Expecting them to correct the situation is no less than expecting the miracle.

The solution lies in appointment of independent adjudicator to adjudicate the dispute between department and the assessee. Independent Adjudicators, who does not belong to the department. When the adjudicator will be from outside the department, we can expect that he will not have any bias in favour of the department and against the assessee. Due to these biases, the departmental adjudication has become a mockery of justice and tolerating such adjudication amounts to tolerating illegality in the name of Law. A concerted pressure of public opinion will convince the legislature to amend the law related to adjudication. Excise Law Times is a great forum to bring all these illegalities in the public knowledge and doing a great service in building a public opinion.

SHOULD NAME OF GUILTY OFFICERS BE MADE PUBLIC:

The paper I was referring has given the instances, however has not given the name of the officers involved in the wrongdoings. Even this author does not give the name of the officers while explaining some wrong doing. However, due to such non disclosure of names, department get an excuse for not taking any corrective action against the guilty officers. This is not good for the society. The name of the guilty officers must be made public, so that the department will not have any excuse for not making inquiry and not taking action against guilty officers.

Coming back to adjudication, when mockery of law and procedure is made during adjudication proceeding, the advocate concerned must bring these facts in the knowledge of people. During appellate proceeding, such wrongdoing can be brought in knowledge of appellate authority. However appellate authorities are not very keen in passing strictures against the guilty officers nor are they interested in imposing cost on guilty officers. Such narration of wrongdoings before appellate authority merely results in “appeal allowed by way of remand”, which is persecuting the assessee again in the name of legal process by the same persecutor.

Till the time such adjudication process is corrected by amendment in law, advocates must bring these wrongdoings in adjudication proceeding by name of the adjudicator concerned. Mere narration of wrongdoing will not result in anything unless until wrongdoer is corrected. I appeal to other advocates and consultants to do the same, if they feel that such wrongdoings must be brought in the knowledge of people, government and legislature for early correction. Adjudication is a judicial process and must not be made a mockery of justice.

Written by:- Advocate Rajesh Kumar. The author can be contacted on The author can be contacted on custom.excise@gmail.com , Web: www.rajeshkumar.co.in

More Under Excise Duty

Posted Under

Category : Excise Duty (4055)
Type : Articles (14953)
Tags : tax regime (23)

Leave a Reply

Your email address will not be published. Required fields are marked *